TheCorporateCounsel.net

I don’t know that this is a development that’s likely to be high on the list of our members’ priorities, but I feel duty bound to report that yesterday, the SEC announced proposed rules on conflicts of interest in securitizations.  Here’s the 189-page proposing release and here’s the two-page fact sheet.  This excerpt from the fact sheet summarizes what the proposed rule is intended to accomplish:

New Securities Act Rule 192 would prohibit a securitization participant from engaging, directly or indirectly, in any transaction that would involve or result in any material conflict of interest between the securitization participant and an investor in an ABS, subject to certain exceptions. Prohibited transactions would include, for example, a short sale of the ABS or the purchase of a credit default swap or other credit derivative that entitles the securitization participant to receive payments upon the occurrence of specified credit events in respect of the ABS.

If adopted, the rule would implement Section 27B of the Securities Act. Section 27B was added by Dodd-Frank & prohibits certain securitization participants from engaging in transactions involving material conflicts of interest & requires the SEC to adopt rules implementing this provision. Comments are due by the later of March 27, 2023, or 30 days after the proposal is published in the Federal Register.

– John Jenkins